Labor Productivity and Real Exchange Rate : The Balassa-Samuelson Disconnect in the Former Yugoslav Republic of Macedonia
ISBN: 9781451906684
Platform/Publisher: Ebook Central / International Monetary Fund
Digital rights: Users: Unlimited; Printing: Limited; Download: 7 Days at a Time
Subjects: Business/ Management;

This paper seeks to investigate the transmission mechanisms linking productivity to the real exchange rate in the former Yugoslav Republic of Macedonia. At first glance, the stylized facts-low labor productivity growth and a trend real depreciation-suggest that a Balassa- Samuelson effect is in play. We find that the relationship between the two is not a result of the traditional Balassa-Samuelson effect. Instead, the depreciation of the real exchange rate reflects mainly the behavior of prices in the tradable sector. We argue that the depreciating real exchange rate may reflect a prolonged transition associated with slow technological growth and the low quality of the country's tradable-goods basket.


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